February 12, 2013

THE MARRIAGE OF MANDATES AND MARKETS:

Several OECD countries have found ways to ensure widespread access to benefits and services without "socializing" the sectors in question. Australia, the Nordic countries, and most countries in southern Europe do all finance and provide health care through public agencies. However, in Canada, Japan, and much of continental Europe, although the government mostly pays for public health care, it is private actors and organizations that provide the health care itself. And in the continental European countries, private insurance either supplements a public insurance system (as in France and Germany) or is the dominant source of coverage (as in the Netherlands and Switzerland). In the Swiss system, for instance, all individuals have to buy insurance, insurers have to accept all who apply for coverage, and public subsidies ensure that coverage is affordable for all. (According to the Commonwealth Fund, about 30 percent of Swiss receive such subsidies.)

In terms of family welfare, in Germany, child care is mainly the responsibility of municipal governments, which funnel subsidies to nonprofit organizations that run daycare centers. In Australia, the Netherlands, and the United Kingdom, most child care is publicly subsidized and is provided by either nonprofit or for-profit entities. In France, publicly subsidized babysitters care for nearly one-third of children under three. Even in the Scandinavian countries, where publicly provided daycare is most common, the state offers considerable benefits to parents who care for their children at home.

The success of some public-private partnerships in Europe shows that generous, effective, and broadly accessible social welfare policies do not require large government bureaucracies staffed with armies of public servants. The government does not have to perform the work itself. But it does have to mandate its provision and monitor the agencies that perform it. Leaving social welfare up to private-sector employers without adequate public support or regulation ensures that many people will fall through the cracks. If Americans truly believe that basic social services are things that all citizens deserve, they should not be content with a social welfare system that often makes getting such services a matter of privilege or luck.

For example, rather than leaving it up to employers and individuals to take care of pension benefits, the government could mandate their provision, making them a required supplement on top of existing Social Security benefits. Washington might also consider requiring all employers to provide three months of paid family leave, with the benefits paid for by a combination of employer and employee contributions. A similar measure could mandate that employers offer paid sick days to all employees. Or the federal government could provide incentives for states to formulate such policies themselves, encouraging local experimentation while helping families across the country get what is considered an unquestioned right almost everywhere else. California and New Jersey have adopted paid family leave funded by employee contributions, and although the benefits are fairly low, all new parents -- not just those with means or generous employers -- can take paid time off from work.

Those interested in effective social policy could also look closely at the activities subsidized through the tax code. When budgets are tight and poverty is high, giving rich people thousands of dollars in tax breaks so they can buy expensive homes does not seem like a wise use of public resources. There is no reason why U.S. tax-based subsidies could not be adjusted according to income, with the deductions or credits getting phased out as citizens' incomes climb. Making more tax breaks refundable (instead of in the form of deductions), moreover, would guarantee that the benefits flowed to people who truly needed them, rather than to those higher up the income-distribution scale. Even after granting such subsidies, the government could continue to rely heavily on the private sector to deliver services, but it could do so at lower cost and to greater effect for a larger share of the population.